Test your basic knowledge |

AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






2. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






3. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






4. The most desirable alternative given up as the result of a decision






5. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






6. The difference between total revenue and total explicit and implicit costs






7. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






8. The total quantity - or total output of a good produced at each quantity of labor employed






9. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






10. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






11. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






12. The ability to set the price above the perfectly competitive level






13. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






14. 0 < Ei < 1






15. The lost net benefit to society caused by a movement away from the competitive market equilibrium






16. The additional benefit received from the consumption of the next unit of a good or service






17. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






18. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






19. Occurs when LRAC is constant over a variety of plant sizes






20. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






21. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






22. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






23. The output where ATC is minimized and economic profit is zero






24. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






25. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






26. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






27. The change in quantity demanded resulting from a change in the price of one good relative to other goods






28. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






29. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






30. The difference between total revenue and total explicit costs






31. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






32. The imbalance between limited productive resources and unlimited human wants






33. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






34. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






35. AVC = TVC/Q






36. A firm that has market power in the factor market (a wage-setter)






37. Two goods are consumer substitutes if they provide essentially the same utility to consumers






38. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






39. A good for which higher income increases demand






40. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






41. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






42. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






43. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






44. AFC = TFC/Q






45. Ed < 1






46. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






47. All firms maximize profit by producing where MR = MC






48. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






49. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






50. Ed = 8 - infinite change in demand to price change